This online, free Rapid Debt Reduction Calculator will calculate how much time and money you could save by paying off your debts using the "rollover" method. If you have more than 10 debts to enter, please use the more comprehensive Get Out of Debt Calculator instead.
What is the rollover method? As each smaller debt is paid off, the freed-up payment amount is then applied to (rolled onto) the next larger debt, and so on until all debts are paid off. As you are about to see, the rollover method can save you a ton of money in interest charges, and allow you to get out of debt sooner than you ever thought possible.
But before you use the rapid debt reduction calculator, please make sure you are fully aware of the biggest reason most people fail to successfully execute their rollover payoff plans.
If you've used rapid debt reduction calculators on other websites, otherwise referred to as "Debt Snowball Calculator," "Rapid Debt Repayment Calculator," or "Get Out of Debt Calculator," you may not have been alerted to the single biggest reason why most people fail to successfully execute their rapid debt payoff plan. What is that reason? It's the total disregard of critical budget item called, "Depreciation Expense."
Everything you own that can wear out (depreciable assets), will wear out. For example, if you own a home, nearly everything except the main structure will need to be replaced within the next 15 years (furniture, appliances, fixtures, roof, paint, flooring, furnace, AC, and so on). The question is, are you setting aside the necessary funds to replace all of your depreciable belongings as they wear out? If not, and if you have no savings earmarked for "asset replacement," then I'm sorry to be the one to tell you this, but you are living beyond your means!
If you're not funding an "asset replacement" savings account, and you're not willing to live without the depreciable assets as they wear out, then taking the time to create a rapid debt reduction plan will be a complete waste of your time. Why? Because if you're not faithfully setting aside funds to replace your depreciable assets as they wear out, then guess what's going to happen to your debt snowball (reduction) plan? That's right, as everything wears out and needs replacing you'll end up using credit to replace your assets, thereby increasing your debt -- not reducing it!
If you can't afford to set aside money to replace your belongings as they wear out, then you cannot afford your present lifestyle. And if that's the case, then the only way you're going to be able to successfully execute a rapid debt reduction plan is to either increase your income, or downsize your lifestyle, or a combination of both. But since you don't need a four-year degree to downsize your lifestyle, and you don't pay income taxes on downsizing, it's usually much easier and faster to become debt free by downsizing your lifestyle versus increasing your income.
One question I'm often asked by users of this calculator, is why I suggest paying off your debts from smallest balance to largest balance instead of from highest interest rate to lowest interest rate. Yes, choosing to pay off higher interest debt first will save you more money in the long run -- that is, if you manage to stick with your plan.
The reason I suggest starting with the lowest balance debts is because you will achieve your first successful "payoff" earlier in the plan. And the earlier you start achieving some success, the more likely you will stick with the plan. Conversely, if your first debt won't be paid off for 2-3 years, there's a good chance you will become disappointed and abandon your plan. The defense rests.
Finally, once you finish using the rapid debt reduction calculator, be sure to jot down your freedom date and the total amount you will be applying to your debts. Then, visit the Debt to Financial Freedom Calculator to see how long it will take to become financially free using your freed-up payments.
With that, let's use the rapid debt reduction calculator to see how much time and interest you will save by paying off your debts using the rollover method.
Check Out My Other Super
To Help You To
Calculate Your ...
Debt # column: This column is an assignment of a number to each debt. The numbers not only indicate the order in which your debts will receive the rollover from previous debts paid off, but are also used to reference the debts in the Debt Payment Schedule.
Creditor Name column: The name of each creditor as you want them to appear on the printed reports. Buttons to create the printed reports will be made available to you once you click on the "Calculate Debt Reduction Savings" button.
Principal Balance column: The principal balance of each debt. If you have more than ten debts I suggest you enter your 10 debts with the smallest balances, and then return to this rapid debt reduction calculator each time you pay off a debt to add another debt to your plan. Also, due to compounding interest, the amount you owe cannot be arrived at by simply multiplying your payment amount by the number of payments remaining. That's because the total of your payments also includes an ever accumulating interest charge. Therefore it's always best to call your lender and ask for the exact amount you owe if you were to pay off the debt now.
Interest Rate column: The annual interest rate of each debt as a percentage (for .06, enter 6%). If a certain debt has more than one interest rate (1 for purchases and 1 for cash advances), enter the higher of the two. When doing any financial planning it's always best to use worse-case scenarios (estimate expenses high and income low).
Payment Amount column: The monthly payment for each debt. If you are including your mortgage in the rapid debt reduction plan, be sure to only enter the principal and interest portion of your mortgage payment (leave out the portion for taxes and insurance).
Interest Cost column: Once you have entered valid principal, interest rate and payment amounts in their respective columns, and moved the cursor to the next line (tabbed out of one line to the next), the rapid debt reduction calculator will calculate how much interest you will pay on each debt between now and when you make the final payment for each. Automatic recalculations of any changes will occur once your cursor moves to another field from the one you made changes to (use the tab key or click to another field using your mouse).
# of Pmts Left column: Once you have entered valid principal, interest rate and payment amounts in their respective columns, and moved the cursor to the next line (tabbed out of one line to the next), the rapid debt reduction calculator will calculate the number of payments remaining on each debt. Automatic recalculations of any changes will occur once your cursor moves to another field from the one you made changes to (use the tab key or click to another field using your mouse).
Monthly amount you can add to your debt reduction plan: Optional: Enter an amount you feel you could add to your rapid debt reduction plan on a monthly basis. If you can make room for it in your budget, this additional amount can put a booster rocket on your debt payoff plan.
Current totals row: This row will list the total of your debt balances, the total of your current monthly payments, the total interest cost of all entered debts, and the number of months from now until the last payment on the last debt is made.
RDR totals row: Incorporating the rollover method, this row will list the total of your debt balances, the additional payment amount, the total of your RDR monthly payments, the total revised interest cost of all entered debts, and the number of months from now until the last payment on the last debt is made.
Time and interest savings row: This row will list the amount of time (payments) and interest you will save by using the rollover method to pay off your debts. You can further increase these savings by increasing the amount you add to your rapid debt reduction plan.